Definitely nothing good – Newspaper Kommersant No. 3 (7448) dated 01/11/2023

The World Bank revised its global growth forecast to 1.7% in 2023 and 2.7% in 2024 instead of 3% for both years in the previous version: the combination of high global inflation, underinvestment and tightening financial conditions was underestimated by WB economists. For 2022, growth forecasts for the euro area, China and India turned out to be significantly overestimated, and underestimated for Japan, Mexico, Brazil, and especially for Russia, which contributed to the next problematic two years with a military operation in Ukraine. The quality of forecasts for the Russian Federation, not without some reason, was criticized by the Russian representation in the World Bank. The World Bank does not have a single explanation of the mechanisms and special recipes for overcoming the investment crisis.

The new “flagship” forecast for the development of the world economy, published on January 10 on behalf of the World Bank Group, combines the WB’s standard semi-annual forecast with some considerations from the group’s economists on the prospects for global development in 2023-2024. Team leader David Malpass opens the preface to the report with the laconic phrase “The global development crisis is intensifying” – this is the leitmotif of the WB’s assumptions in all regions of the world. If in June 2022, global GDP growth for 2023 was forecast at 3%, now it has been reduced to 1.7%, the forecast for 2024 has been worsened from 3% to 2.7%.

With the current forecast of world GDP for 2022, the World Bank (the exact data will be later, now we are talking about the first estimates) was not mistaken – this is 2.9%, however, a lot had to be corrected in the structure of this growth since June. The largest error in the June forecast was contained in estimates of the dynamics of Russia’s GDP — it was revised for 2022 by 5.4 percentage points (p.p.), Turkey had to add 3.2 p.p., Poland had to add 2.4 p.p. , 1.5 p.p. – Mexico. However, the main problems of the forecast for the past year are the underestimation of the dynamics of Japan’s GDP (in fact, it grew by 0.8 percentage points more than in the WB June forecast), the overestimation of growth in the euro area (it turned out to be less .p.) and in China (1.2 p.p. less than previous expectations).

The Russian representative office in the World Bank, through news agencies, commented on the content of the report as “causing criticism.”

The claims of the Russian side can be divided into three parts: these are “excessive politicization” (expressed in too frequent, according to Russian representatives in the WB, mention of the Russian Federation), overestimation of growth in the euro area and the UK, and poor consideration of the impact of sanctions against the Russian Federation on world trade.

However, estimates of Russia’s GDP, after criticism from the Russian management, are recognized as more adequate than before. It should be noted that the World Bank worsened the forecast of the Russian GDP dynamics for 2023 by 1.3 percentage points and for 2024 by 0.6 percentage points compared to the previous version. , in some cases is really elusive and very controversial. Thus, the description of the mechanics of the decline in the Russian GDP in 2022 begins with the following explanation: “… the Russian economy shrank by the expected 3.5% … with declining real wages that destroyed consumer spending, and investments that collapsed due to international sanctions as a result of the invasion of Ukraine” . Even taking into account the clarifications about the withdrawal of foreign companies from the Russian Federation, strong fiscal stimulus and the actions of the Central Bank, this can hardly be called an adequate explanation for both the Russian dynamics of macro indicators and changes in the forecast.

However, particular problems of the WB forecast for Russia do not cancel its general problem, which WB economists do not hide. The report does not give a general explanation of the reasons for the “combination of slow growth, persistently high inflation, tightening financial conditions and also high levels of debt, which increase the risks of stagflation, financial losses, ongoing fiscal pressure and weak investment” in the global economy – in fact, it only cautiously suggests that the superimposition of the economic impact of the pandemic on the outcome of the military actions in Eastern Europe and on the longer post-COVID recovery in China has led to a systemic reassessment of the risks of investors in developing countries, the nature of this crisis is a decline in global investment, and therefore it will be relatively protracted , since de facto investments in entire regions with developing countries “dropped out” of the global investment process. However, the WB description is rather contradictory: for example, in 2023, according to its calculations, only the PRC and developing countries will contribute to world growth (where the problems of underinvestment are considered critical), assumptions about “stagflation” are accompanied by the expectation that global inflation will decrease to comparable to the end of 2019, already in the second quarter of 2023, and the deviation of world GDP from pre-pandemic forecasts in the “global recession” scenario does not fundamentally differ from the baseline on the horizon until 2024. Because of this, the report in graphs and figures looks much less alarmist than in words.

Nevertheless, the WB is confident that what is happening (one of the advantages of the report is a more detailed account of the contribution of the Russian military actions in Ukraine and their consequences for the whole world as a trigger for other negative processes) is a scenario of a developing, and not already realized crisis.

Because of this, in the summer of 2023, the WB estimates may obviously turn out to be worse than in January. Crises of this kind, such as the present one, are generally more politically driven than purely economic decisions, and therefore their effects are calculated imprecisely and with large assumptions. However, the word “uncertainty” is mentioned very infrequently in the WB report (although it is constantly present in the chapters on the prospects for the restoration of Ukraine; according to the new WB estimate, $349 billion is needed for this, and analysts warn that these numbers are growing). In the text of the report, it is definitely expected that 2023 for the global economy (including Russia) looks significantly worse than it looked six months ago.

Dmitry Butrin